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how using experts and customers to test drive your products can help final tune your business. we'll show you how to take an online business and turn it into a booming brick and mortar operation. and dolce the dog helps us sniff out investors. that's coming up next on "your business." small businesses are revitalizing the economy. and american express open is here to help. that's why we are proud to present "your business" on msnbc.
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hi there, ern. i'm j.j. ramburg and welcome to "your business", where we give you tips and advice to help your business grow. most entrepreneurs do their best to avoid small business blunders. but not all missteps are bad ones. sometimes you can learn valuable lessons. in fact, one business owner and her team are making it a habit to test their theories and learn from the results. >> our philosophy is to try to test and learn quickly. >> lindsay says everything about her business is an education. the founder and chicago of chicago-based marbles the brain store is running her business based on a very flexible philosophy. >> people maybe don't think
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about all the opportunity that you might have. >> her approach is best described as test and learn. the concept is to test out ideas and learn from the results. >> my thought and i hope my team's thought is let's test it out. we try to be really efficient and try things really quickly and move off of them quickly. >> part of the plan involves testing products. all of which are designed to promote brain health. she and scott brown, the marbles' director of product development have a clear mandate. >> it has to be something that's engaging and fun for people. second, it has to be high quality. >> before anything ends up on the marbles shelves, items like puzzles, books and come computer software are tested by a panel of experts to ensure their authenticity. employees check out problems as well. >> this is a neurologist, psychologist, occupational therapist a group of people to make sure the product stimulates the brain. >> i'll spend time playing with it myself and seeing how that
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works. spend time putting that product in front of friends and family. in front of other employees. >> in the store all products are open for customers to try. that idea has been key to marbles' mission from the start. it hasn't been bad for the bottom line either. >> we had ten or so things of 50 things that we sold open for people to try. we noticed those were the things that sold the most. we knew -- we tested that and saw that worked. when i do bring a new product in, i'll spend time in the store not as an employee, but just as a shopper watching how customers interact with the product. i know very quickly how a product will do based on how people engage with it. >> once the customers -- >> right now our technique is we're going to teach you how to use it and then we can speak to the product as how it does improve the brain and how it works different parts of the brain. >> as marbles was developing its product line, the company
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quickly learned that its original customer focus may have been too narrow. >> we at first thought we were going to have products that were primarily for seniors or baby boomers. we learned as people are in the store that they really enjoyed it for themselves and they might be 30-year-old individuals. or teenagers or they were younger kids and kids love the store. >> so that forced the company to review and diversify its offerings. >> we've learned how to grow our product assortment from watching the customer in the store and i think sometimes in a business you aren't able to do that as much unless you have this like lab. >> the company's most expensive and possibly riskiest test and learn project involved real estate. the goal was to find out which store low cases could make the most idea. >> the idea of testing different retail locations is because we want to have a good plan for growth. you could quickly just say the first store was a downtown
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location, let's get in all downtowns around the country and let's expand that way. that's not very -- it's not a big thought. what we wanted to do is test a suburban mall, suburban main street and that's what we did in the first year. and it's expensive to do that. >> while the idea isn't necessarily cost effective, she says the long-term goal is to save cash and better position marbles for expansion. >> we'll have made the decision to open 15 downtown location and really we should have been a suburban mall concept. so we got into short-term leases. that's how we are doing is everything short-term. we're now starting to get into longer term leases in order to secure that position as we grow. >> after figuring out which locations are the best for business, the idea is now being applied to stores in illinois and minnesota. >> the main street location both suburban and downtown could be great stores for us and we hope they're successful, but they're not as repeatable.
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but a suburban mall there are a lot of those. that's what we did in 2010. they're all mallow occasions. >> she says opening in malls automatically means more foot traffic which is what marbles needs to get customers in the door. >> we don't have a huge marketing budget. we're not a huge company, we're small. we're paying for that real estate. when someone walks by intrigued, they see the name, what is this place. >> she's grateful for the chance to test and learn with her business. it's not something she says she ever could have done in the corporate world. >> you're a small business owner. you have the opportunity to test a million things because you have control over it and you can easily get in touch with your store manager and try something. >> she admits that she and other marbles leaders try to keep their test and learn philosophy in check. >> we have to hold ourselves back sometimes so that we don't create operational anxiety across the whole company. but we do want to test new
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things. we want to try new bundles of products. we want to try different display ideas. >> the team would rather make the necessary missteps now in order to avoid problems in the future. >> you can't learn anything if you're doing it right. you learn from your mistakes. so you have to set yourself up to go through those mistakes. if you have so naive to think that you are brilliant and never make mistakes you're doomed. >> sometimes learning from our mistakes can help take a business to the next level. let's turn to this week's board of directors. we have a small business editor of "the wall street journal" and author of the book "the wall street journal complete small business guide book." a fantastic book. tim ferguson is the managing partner of next street. great to see both of you. >> nice to see you. the first thing that struck me
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when we talked about this piece was when she said when i was at a big corporation i couldn't do this, but at a small business i could. it's so true. that's the beauty of small business. ? that's so great that she involved her employees, too. that's a special thing that you can do at a small company that doesn't exist at a large company. it helps to motivate your employees when they're so directly involved with the products. >> we talk with small businesses throwing spa getty at the wall. >> this is a a focus group. it's the most grassroots type of focus group. it's not assuming that you know everything and you're asking customers and see what their experience is. >> sometimes you might see an effect and atribute it to the wrong cause. and you have to be really careful about that when you have this kind of philosophy. >> i'm hearing a lot from people who are actually doing this whole idea of testing rather than writing a business plan. i just interviewed some very successful entrepreneurs who
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started a company called rent the runway. they think business plans are a waste of time. they believe in just testing. they would have focus groups to test their demographic, what their pricing would be. i don't think you should throw the business plan out the window. i think you should still have that. i think this is a very smart approach. >> can you test too much? >> you can. then you never launch anything and you become in limbo. what i would say about the whole question about the testing piece is that i do think that some people in terms of the business plan, should think about brand order. a brand order can be very broad. you're talking to a whole raft of different people and not just thinking about this is the appeal, this is what my breath will look like. >> thank so much you guys. we know all about the mass market stories that built their brand names as brick and mortar businesses before going to the internet. in today's your online business, we look at one business order
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who did it the other way around. he first developed his brand online and then he opened a brick and mortar location. >> thanks for coming into velocity. i'm john. >> john from seattle had a dream of opening a retail store. what he didn't have was cash. >> looks like some office supplies. >> instead of quitting his job, taking out a loan and piling on the stress, he decided to test the waters job line. >> starting on the internet i could do it while i was teaching. >> the initial outlays online were much smaller than opening a brick and mortar home furnishings store. >> i had to have a lot less inventory than to fill up a store front. it was a lot less money out the door if all you have to do is set up a website and ship things every day out of your website. >> but being online in a trendy industry brought other challenges. >> i didn't know if anybody would sell to me. i was a guy in my basement
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selling product on the internet in a way that nobody else had ever done it before. we remember the first people to put the lines online. >> to convince high end designers of products like these to give his untested site a chance, he offered some of them something most brick and mortar stores can't, unlimited shelf space on his site. the formula worked, web customers flocked to his site. he quit teaching and his company took off. >> your inventory can be virtual, your customers are almost virtual. at the end of the day you don't have to worry about if the door is locked and what's the cash many the cash drawer. >> velocity was making good money and that could have been enough, but it wasn't. >> it was always in the plan was that we would start the website first, build up enough clientele and business through the website that it would support a retail store. >> thank you so much. have a good day. >> he was ready to invest the time and money it takes to open
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a brick and mortar store even though it wasn't easy to do. >> that one only comes in that size. >> there's so many places where someone could go wrong in an environment such as this. overstocking, understocking, overstaffing, understaffing. i think a lot of people don't want the perceived headaches of a brick monday mortar store. it's a lot of work to run a physical location. online we make more money. >> the store doesn't bring in the kind of high profits the website does, but this isn't a concern because profits alone aren't the only goal. >> i wanted to interact with the people that loved design. and i wanted to meet them in person. >> the brick and mortar store also generates credibility, which brings bigger media attention and that brings in bigger revenue. >> having a brick and mortar store helps the national press feel and trust that we are a legitimate source for design items. the more word of mouth that's out there, the more people that know of the store and the site,
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the more people are going to go to the website when they're not here in seattle. >> so he feels he's hit a winning combination. the brick and mortar builds the buzz and the buzz brings buyers. >> click and mortar is what we like to call it. it's a wondserful synergy. every dollar counts in this unpredictable economy. here are five common bookkeeping mistakes to avoid. number one, neglecting sales tax. a mistake in the collection or reporting of sales tax can lead to big fines. two, not classifying employees correctly. if you hire an independent contractor make sure you're aware of the tax implications. three, poor petty cash management. set up a system to track who spent petty cash and standardize the reporting process. four, not reconciling your bank accounts. check your accounts on a regular basis so you can spot any
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irregularities. and number five, failing to track reimburse jbl expenses. make sure you and your staff are tracking and filling their expenses in a timely manner. still to come, where's the money? we'll talk about looking for funding based on how much you need and the size of your small business. and mar marta stewart look out, today's elevator picture is in the bed sheet business for the well rested dog in the house. this is my band from the 80's, looker. hair and mascara, a lethal combo. i'm jon haber of alto music. my business is all about getting music into people's hands. and the plum card from american express open helps me do that. you name it, i can buy it. and the savings that we get from the early pay discount has given us money to reinvest back
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into our business and help quadruple our floor space. how can the plum card's trade terms get your business booming? booming is putting more music in more people's hands. president obama's proposed budget for 2012 calls for a 45% decrease #funding for the small business administration. it remains to be seen how that move could affect the credit for small business owners seeking sba backed loans. in this one's where's the money, we want to look at other funding alternatives based on how big your business is and how much capital you need. mitch jacobs is the ceo of on deck capital, a financing network for small businesses unable to qualify for traditional loans. thanks for joining us. >> thanks for having me. >> i want to split this into
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chunks. if you are a business and you're pretty small you have less than $150,000 in revenue, where should you go? >> this is a category of businesses just getting off the ground. they've got some revenue, some customers. they should look at community development, financial institutions, cdfis. these are organizations that have the time and people to spend a lot of time developing the business plan and doing the things necessary for someone who's at that stage of development in their business to access their first big loan and their first capital to grow their business. >> it's helpful it's not just money, it's consulting. >> there's a lot of hand holding involved. at that point that's really needed. >> let's take to it the next level, you have between $2r50,000 and maybe $5 million this is where your company comes in. >> this is the most exciting time in terms of capital access for these businesses. finally technology is having a huge impact in what options are available and how capital gets delivered.
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it's super exciting. if you're a business that serves other businesses and you have large receivables, now you can go join line to the receivables exchange. you can auction your receivables. >> it's expensive. >> i think the receivables exchange discounts a penny or two right in line with other factors. a lot of these cases the automation from technology is reducing the overall cost, although the option looks different to the business owner. >> i want to talk about what you do. oftentimes you go in and you get a loan and they look at your credit score. maybe the credit score isn't good but your business is doing well and it's frustrating because you can't get money. >> it is frustrating. it is affecting millions of main street businesses across the united states. if you run a restaurant or any kind of restale operation, typically you're getting measured on your personal credit score. that's a shortcut for the bank. it's too expensive to underwrite a $50,000 loan to a flower shop. the on deck system taps into the
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business data that business owners generate every day. and creates an overall health profile of the business. then the business is finally able to access capital based upon the performance of their business rather than personal credit score. >> so my credit score is terrible. i run an ice cream shop but it's generating a lot of cash. how long do i need to be in business and show -- or how long does my business have to been doing well in order to you and get money. >> typically we look for a year of activity. the other thing is stop worries about your credit score. it's irrelevant to the performance of your business. what matters are you generating customers and keeping your expenses largely in line. if they are, you should be able to access capital. that's what the on deck system is all about. >> it's all online. so i apply online, you have access to my bank? >> we have about 500 contribution partners around the united states. you can turn to somebody to help
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you. you can go to and provide about 15 fields of information about your business. our system goes and pulls thousands of pieces of information to be able to create that full financial profile so now you can get that credit. >> up to $100,000. >> up to $100,000. the interest rate is higher than you'd pay at a bank bank, but it's a short-term loan. >> it's higher but it's a much shorter term and paying down every day. what business owners need is something where they can borrow and pay it down and they're ready to borrow again. these things are always happening in their business. it costs substantially less. >> thank you so much. we really appreciate it. >> thank you for having me. today's elevator pitcher wants to let sleeping dogs lie. on the pitch, doggy bed sheets. >> i'm the creator of doggy
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sheets. doggy sheets are fitted sheet coffers for dog beds. they're made in the usa of 100% earth friendly cotton. they're machine washable, convenient and easy to use. they protect the bed from wear and tear and keep it clean. there are 77 million owned dogs in america. 50 million households own a dog. last year $48 billion were spent on pet products. due to this trend we expect that our product has great potential. currently we are selling the product online and we want to branch into retail. we are looking for $100,000 investment for markets and inventory. we are a women-owned business and we have a patent pending. >> good job, maria. your spokesperson is going to jump off. he's so cute. let's hear what our panel thinks. tim, you first, did she get everything in the pitch she needed to? >> she did. i'd like to have an idea of what the plan is for the utization of the $100,000.
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>> what about you? >> i thought it was great. i like how that's machine washable. i'd like to hear how many you've actually sold. i didn't hear that. i want to hear that you have a track record. >> would you take another meeting? i don't usually put my opinion, why is this defensible? would you take another meeting? >> i would. people are crazy about their pets. this is a nice product. i don't think there's many competitors out there. i would definitely take another meeting. >> i have to dogs, by definition we need this product. you can't find it anywhere. >> so many people have pets. you did a fantastic job. thank you so much. thank you guys for all your help. if any of you out there have a product or service and you want feed back from our elevator pitch panel on your chances of getting investors, send us an email. please include a short summary of what your company does, how much money you're trying to raise and what you intend to do
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with that money. you never know, somebody watching the show might be interested in helping you. it's now time to answer some of your business questions. here's a question about which employees to hire first. >> i want to take my company to the next level. i have infrastructure all set up. we have five employees. we want to go to the next step. is it time to hire sales or marketing first. >> whatever you need. >> before she starts hiring employees to make sure she's got a good sense of cash flow and she will be able to support those employees' salaries this is the thing that keeps business owners up at night worrying about payroll. make sure she can afford it. next if she's got the infrastructure in place, clearly sales is definitely where she wants to hire. she needs to sell those products. >> sales is something you can outsource. you can hire a contractor to do sales. maybe what you do is you have to look at your staff now and can
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those people in a pinch sell or can they market or you're -- >> i'd say something a little different. what's your plan? what is it that you're going after? where do you want to grow? that could then inform you in terms of specific people that you need to bring on board. it may actually be she say she's got her infrastructure, what does that really mean. in terms of the interfaes with the customer there may be a a better way investing the dollars in a website, for example. >> in terms of outsourcing, i don't know if she should outsource at this stage especially if she is trying to build a sales team. she wants people who intimately know her products. i think it's best to keep it in house at this time. >> tim is shaking his head. >> i think it's better to control the key function yourself. outsourcing is way more expensive than you realize and you have a problem interfacing with the customer in. the previous segment when we
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talked about testing, it's very difficult to do that type of thing if they're not real people. >> right. the next question, the possibility of losing sales to a cheaper product. >> how do you compete -- which is a lower quality. >> we did a story about this exact question a couple years ago. a soap manufacturer who lost 50% of his business by having one client leave and go to an overseas manufacturer. he made it work. but in general, how do you compete with that? >> you have be sure that you have a proposition where the customer base wants to pay a premium for something that's of higher quality. who's saying that it's higher quality? what does that really mean? and do you understand what it is that you're competing with? on that end i would say that perhaps it's around the customer experience, the customer service which would be very different from having that from a
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manufacturer that was offshore. >> if it is higher quality how do you market it and how are you sure that it's something that people care about having higher quality for? >> it sounds like this business owner maybe philosophically has this kind of thought he wants to keep production or manufacturing in the u.s. maybe to create jobs. that's something you can use in your marketing. i think that does resonate with certain consumers. i think you might be able to recoup some costs with that marketing. the other thing we were talking about this, outsourcing sounds great having your product made in china -- >> it's hard. >> it does work for some people. some businesses are able to save a lot of money that way. if you do run into quality issues you've got a language barrier, time zone differences. it can be such a headache. i would say maybe not think of outsourcing as something you're losing out on. >> in his case maybe you'll pick up customers where some of his
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competitors failed. thank you for your advice. we really appreciate it. if any of you have a question of our experts go to our website. hit the ask the show link to subsubmit a question for our panel. or if you'd like, you can email us your questions or comments. they had some helpful advice about how to improve your business. now let's get some great ideas from small business owners just like you. >> being able to identify what's the new thing, how your brand can fit with it, but have the retail channel that can actually move it was a big learning curve for us. i've been, withing hard to get our group internally to move faster. to react quicker and try to come one the stuff before other people have it on the market. >> one of the things that really helped us to save money, one of the things we found, i could say
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in one word is skype. we were able to skype and work with people internationally on all phases of development. >> i would love for people that are small business owners that have a great idea to seek out the local incubators at their universities and colleges. i'm part of the esf incubator. it's amazing the resources that you can utilize on a college campus. if you're running a small business you may not have time to read all of the day's small business headlines. if so, our website of the week has a news alternative for you. the rise to the top is a web based business show featuring interviews with small business news makers. the site is moderated by a small business author is updated regularly. to learn more about today's show click on our website. you'll find all of today's
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segments plus web exclusive content with more information to help your business grow. don't forget to become a fan of the show on facebook. you can also follow us on twitter. next week, the old saying goes, if you want something done right, you've got to do-it-yourself. does that work when you're trying to get celebrities and movie stars to endorse your products? >> i open up "people" magazine and there is cameron diaz wearing my bag. a huge picture of her standing like this with the clutch. i jump up out of my seat, next to a stranger. hit the ceiling. freak out. i was so excited. >> find out how this small business owner gets a list stars to be paragraphed with her products and it doesn't cost her a dime. until then i'm j.j. ramburg. and remember we make your business our business.
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this is my band from the 80's, looker. hair and mascara, a lethal combo. i'm jon haber of alto music. i've been around music my entire life. this is the first alto music i opened when i was 24. my business is all about getting music into people's hands. letting someone discover how great music is, is just an awesome thing. and the plum card from american express open helps me do that. i use it for as much inventory as i possibly can. from maracas... to drums... to dj equipment... you name it, i can buy it. and the savings that we get from the early pay discount on those purchases has given us money to reinvest back into our business and help quadruple the size of our floor space. and the more we expand, the more space we have for instruments and musicians to come play them. rock n roll never die. how can the plum card's trade terms get your business booming? booming is putting more music

Your Business
MSNBC July 9, 2011 5:30am-6:00am EDT

News/Business. A focus on issues facing small business in the United States.

TOPIC FREQUENCY J.j. Ramburg 2, Jon Haber 2, Seattle 2, Mascara 2, Lindsay 1, Tim Ferguson 1, Dolce 1, Ern 1, Understaffing 1, Web 1, The Idea 1, An Email 1, Scott Brown 1, Mitch Jacobs 1, Understocking 1, China 1, Msnbc 1, Illinois 1, Chicago 1, Obama 1
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